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ASIA PACIFIC MARKET OUTLOOK
HEATING, VENTILATION AND AIR CONDITIONING (HVAC)
February 2018
www.reciprocus.com
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Table of Content
2
Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
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Executive summary
3SOURCE: Technavio; Euromonitor; Mckinsey Global Institute; Deloitte; Reciprocus;
Strong growth drivers in the APAC industryThe HVAC industry is generally driven by the demand of construction, which has been rapidly growing in APAC
due to the increasing population growth and urbanization. Specific growth drivers in APAC for the HVAC industry
are the climate changes and increasing awareness in energy consumption of the HVAC systems.
Challenging but attractive opportunities in APACGlobal HVAC industry has been steadily increasing with a CAGR of 5.24%. APAC accounts for 51.24% of the
overall market share, and will contribute 54.84% of the incremental growth in the foreseeable future, making the
APAC region an attractive opportunity to explore. Firms with the right pool of technical expertise will excel despite
the challenging regulations and standards.
Favourable market conditions for expansion and successionThe industry in general continues to consolidate on the basis of a strong global economy and parent construction
industry. Larger industry players continue to seek value and win contracts by improving their core capabilities and
expanding their service offerings. Smaller companies can find themselves well-positioned to sell their assets as
the competitive landscape intensifies.
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Table of Content
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Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
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APAC owns the largest industry market share of HVAC systems and the demand is
expected to increase even more, creating more opportunities for business expansion.
5SOURCE: Technavio; BIS Research; BCC Research; Euromonitor; Reciprocus
-
50.00
100.00
2016 2017 2018 (F) 2020 (F)
APAC Americas EMEA
HVAC Market Size by Region in US$ bn
Asia Pacific (APAC) has been, and will continue to be the
largest market for HVAC systems due to the growing
population, climatic conditions, increasing urbanization, and
demographic changes in the region.
APAC Rest of the world
HVAC Market Share
(E) CAGR
5.7%
The two economic giants of Asia, China and India experience the largest demand for
HVAC systems because of its enormous population, even by global benchmarks
Following close behind are countries like Indonesia, Malaysia, Thailand and
Philippines where the population are already collectively larger than that of the E.U.
CAGR
5.1%
2016
2017
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Demand for HVAC systems will create opportunity for the individual sub-categories,
but specific conditions and requirements will impact each sub-category differently.
6SOURCE: Technavio; BCC Research; Reciprocus
0%
50%
100%
2017 APAC HVAC Market Share
by Equipment and Service in %
Services
Equipment
APAC Ductwork Market Size
in US$ bn
-
0.50
1.00
1.50
2.00
2.50
2017 2020
Sheet metalFlexible non-metallicFibreglass
Chiller
Pump
Cooling tower
AHU
FCU
MV Fan
Ductwork
Pipework
Control panels
Electrical
Other eqp.
Accessories
Market for ductwork is expected to move in tandem with
the increasing demand for HVAC systems, which in turn is
attributed to the high level of construction activities.
Growth in the air duct market is expected as demand for
HVAC systems increase. However, the opportunity is
diminishing with the increasing sheet metal prices.
Vendors are looking to alternative materials that are lower
costs and easier to manufacture such as pre-insulated
duct systems.
Sheet metal ducts will still be the most used material for
HVAC ducting due to its robustness and low maintenance
costs. Fibreglass ducts are not expected to retain its
market share due to its poor thermal performance and
potential mold problems, especially in a humid climate.
Increasing general demand for HVAC systems will be experienced even in
the sub-categories of the industry. However, demands for cooling efficiency
will affect specific sub-categories that have greater influence on the
efficiency of the system.
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Table of Content
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Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
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Key trends portray a challenging outlook for the HVAC industry.
8SOURCE: Technavio; PWC; McKinsey Global Institute; Reciprocus;
1
Asia Pacific has been observed as the most active region for mergers and acquisition. The volume of E&C
transactions accounts for more than 50% of the total volume of APAC transactions, mostly due to the broad span of
industry classifications and the increasing need to provide technical expertise in the different areas.
Market consolidation
will continue
2
Larger firms have been steadily building up cash reserves and their internal expertise and have been observed to be
expanding outward from their home markets to compete against established global players. These expansion efforts
are driving them to buy up assets to build up critical capabilities and also for the purpose of new market entry.
Competition will continue to
grow with globalization
3
With the growing awareness of energy consumption and greenhouse gas emissions, governments have
implemented new standards for energy efficiency which impact the HVAC industry the most. The stringent standards
will create more complex projects and demand more effective optimization on the load size of the HVAC system.
Building standards will
become more stringent
4
Consumers are becoming more informed, tech-savvy, and environmentally-aware. There is a growing need of
consumers wanting to be monitor the HVAC systems in real-time and able to control the systems remotely. This
change in behavior will result in an increase demand for high-end HVAC products with increased connectivity.
Changing customer
behavior
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Table of Content
9
Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
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Despite the lack of substitutes for HVAC systems, the industry will continues to face
intense competition and experience cost pressures from suppliers.
10SOURCE: Reciprocus
0
1
2
3
Bargaining powerof suppliers
Bargaining powerof buyers
Threat of newentrants
Threat ofsubstitutes
Threat of rivalry
Bargaining power of suppliers: HIGH
Vendors are highly dependent on raw material
manufacturers for the production of HVAC systems.
Bargaining power of buyers: MODERATE
Customers have the option of sourcing at competitive
prices from regional or domestic vendors.
Threat of new entrants: MODERATE
Regional vendors are entering the every growing
industry. However, the capital-intensive industry is
difficult to enter.
Threat of substitutes: LOW
There is no direct substitute available for HVAC
systems.
Threat of rivalry: HIGH
Competition is very high due to the presence of large
global players and emerging regional and local players.
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Table of Content
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Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
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In response to these trends and challenges, firms should evaluate their position in the
market and emphasize on their strategic priorities.
12SOURCE: Reciprocus;
To maximize on the benefits of change, your
business requires a plan for every stage of the
business life cycle. With strategies in place and
careful planning, you will be able to maneuver
through the cycle and embrace new possibilities and
opportunities.
HOW RECIPROCUS CAN HELP
Market research to help you better understand
the market opportunity, your potential customers,
and strategic positions you can take
Business plan advisory to work with you to
identify hidden areas of value within your
business and develop strategic activities for the
expansion or succession of your business
Scouting efforts for strategic partners that can
benefit your business and are in line with your
objectives
Deal advisory and execution to secure and
deliver the best value you can get in a
transaction, whether as a buyer or a seller
Entry
Management dilemma:
Who are my customers and how
do I reach them?
Strategic priority:
Market research to keep in pace
with the market demand
Mature
Management dilemma:
Expansion or succession?
Strategic priority:
Securing the value of the
business in preparation of either
direction
Growth
Management dilemma:
Where and how should I expand?
Strategic priority:
Reviewing your corporate strategy
and develop action plans to
achieve your objectives
Established
Management dilemma:
What areas can I improve and be
more productive?
Strategic priority:
Strategic partnerships that can
boost your margins
Early stages
Later stages
Business
life cycle
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Table of Content
13
Market Overview
Key Market Trends
Industry analysis (Porter’s five forces)
Executive Summary
Strategic priorities
Contact
| Reciprocus International
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Contact
14
Reciprocus InternationalInternational Plaza10 Anson Road #10-22Singapore 079903
Tel: +65-6225-9986Fax: +65-6225-8223
Reciprocus AmericasEmpire State Building350 5th Ave, Suite 7610New York, NY 10118
Tel: +1-212-565-0600Fax: +1-646-349-3532
Reciprocus EuropeTaefernstrasse 22a5405 Baden-DaettwilSwitzerland
Tel: +41 56 470 42 70Fax: +41 56 470 42 72
Goh KX, JasonVP, Business [email protected]
David [email protected]
For more information on our advisory practice, please visit www.reciprocus.com